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Counties cope with modest bump in hotel tax share

The Associated Press

HONOLULU — The bump in hotel tax revenue that state lawmakers offered Hawaii’s counties this legislative session was a glass-half-empty raise.

Mayors wanted a return to a 44.8 percent share of the transient accommodations tax. That model would have generated an estimated $165 million for the counties to split in fiscal 2013. Instead state lawmakers raised the cap on the counties’ share from $93 million to $103 million.

Counties argued that they needed more money to cover basic services visitors use, including park maintenance, water, sewer, police and fire services, and road upkeep. The state capped the counties’ share of the TAT revenue after lean tourism years. Since then, visitors have returned in force. After receiving only 6.5 million visitors in 2008, the state has welcomed increasingly more each year since, including a preliminary total of a record 8.2 million in 2013.

The counties would have preferred $62 million more from the tax to cover those extra costs, but they’re putting the $10 million to use.

The City and County of Honolulu receives 44.1 percent of the counties’ TAT haul, for a $4.4 million increase. Mayor Kirk Caldwell had been looking to raise resort and hotel property taxes by $1 per $1,000 of valuation, to $13.40. That would’ve generated about $8.2 million. With the $4.4 million from the state, the county this week is considering a mere 50-cent increase.

“Right now Honolulu property tax payers have to make up the difference and they’re subsidizing services for tourists while the state keeps the rest of the money,” said Jesse K. Broder Van Dyke, a spokesman for Caldwell’s office. “In a budget of $2 billion it’s a very small increase. Though we’re happy to have it rather than nothing.”

Maui County gets 22.8 percent of the counties’ TAT revenue, for a $2.3 million bump. That’s a far cry from the $17 million the county might have received with a return to the old revenue model, but it buffered some of the cuts the county council made, said Sandy Baz, the county’s budget director. The balance of that money would have paid for more security at county parks and a new ladder truck to replace one that required extensive repairs last year. The county council shelved those projects rather than raising property taxes.

“We actually had a really strong case, everybody thought, to have that cap lifted or some large portion of it restored,” Baz said. “Money’s always a source of tension, whether it’s between siblings or between governments.”

Hawaii County is dedicating its 18.6 percent share of the TAT increase, or $1.9 million, toward future health care liabilities for public employees. The county had balanced its budget before the change in the tax sharing structure. Mayor Billy Kenoi “decided early on that we wouldn’t budget for any money we didn’t have,” said Kevin Dayton, the mayor’s executive assistant. The county’s contribution toward its future health costs will be $6.1 million in the coming year, almost double that of the previous year.

Kauai County’s 14.5 percent share, worth $1.5 million, will plug part of a budget shortfall it is reckoning with this week. Specifically, it’s likely to put the money toward more fully funding its employees’ health plans, to 89.9 percent of its liability, according to Mayor Bernard Carvalho Jr.’s May 7 supplemental budget submittal to county council.